Overconfidence and Corporate Tax Policy

42 Pages Posted: 14 Mar 2014 Last revised: 3 Feb 2018

See all articles by James Chyz

James Chyz

University of Tennessee, Knoxville - Department of Accounting and Business Law

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems

Asad Kausar

American University - Kogod School of Business; Nanyang Technological University (NTU); Nanyang Technological University

Luke Watson

University of Florida - Fisher School of Accounting

Date Written: January 29, 2018

Abstract

Using a sample of firms experiencing exogenous CEO departures, we investigate whether firms with overconfident CEOs avoid more tax. We find robust evidence of a positive relation between proxies for corporate tax avoidance and CEO overconfidence. Because our empirical tests use a panel of firm-years with exogenous CEO departures and include controls for stationary firm effects as well as observable firm characteristics, we are better able to isolate the role of an idiosyncratic personality trait (i.e., overconfidence) on corporate tax outcomes, thus adding to the literatures on overconfidence, managerial effects, and tax avoidance.

Keywords: Overconfidence; tax avoidance; manager effects

JEL Classification: D80, M40, H25

Suggested Citation

Chyz, James and Gaertner, Fabio B. and Kausar, Asad and Watson, Luke, Overconfidence and Corporate Tax Policy (January 29, 2018). Available at SSRN: https://ssrn.com/abstract=2408236 or http://dx.doi.org/10.2139/ssrn.2408236

James Chyz (Contact Author)

University of Tennessee, Knoxville - Department of Accounting and Business Law ( email )

Knoxville, TN
United States
865-974-1701 (Phone)

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Asad Kausar

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Nanyang Technological University ( email )

Nanyang Business School
Singapore, 639798
Singapore

Luke Watson

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0208 (Phone)

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